XII – BUSINESS STUDIES

ORGANISING
CHAPTER 5
Organising essentially implies a process which coordinates human efforts,
assembles resources and integrates both into a unified whole to be
utilised for achieving specified objectives.
Organising can be defined as a process that initiates implementation of
plans by clarifying jobs and working relationships and effectively
deploying resources for attainment of identified and desired results
(goals).
 PROCESS OF ORGANISING
(i) Identification and division of work: The first step in the process of
organising involves identifying and dividing the work that has to be done in
accordance with previously determined plans. The work is divided into
manageable activities so that duplication can be avoided and the burden of
work can be shared among the employees.

(ii) Departmentalisation: Once work has been divided into small and
manageable activities then those activities which are similar in nature are
grouped together. Such sets facilitate specialisation. This grouping process is
called departmentalisation. Departments can be created using several
criteria as a basis. Examples of some of the most popularly used basis are
territory (north, south, west etc.) and products (appliances, clothes,
cosmetics etc).
(iii) Assignment of duties: It is necessary to define the work of different
job positions and accordingly allocate work to various employees. Once
departments have been formed, each of them is placed under the charge
of an individual. Jobs are then allocated to the members of each
department in accordance to their skills and competencies. It is essential
for effective performance that a proper match is made betweenthe
nature of a job and the ability of an individual. The work must be
assigned to those who are best fitted to perform it well.
(iv) Establishing reporting relationships: Merely allocating work is not
enough. Each individual should also know who he has to take orders
from and to whom he is accountable. The establishment of such clear
relationships helps to create a hierarchal structure and helps in
coordination amongst various departments.
 ORGANISING PROCESS

IDENTIFICATION
AND DEPARTMENTALISATION ASSIGNMENT ESTABLISHING
DIVISION OF WORK OF DUTIES REPORTING
RELATIONSHIPS

Identifying the work and

Activities which are
dividing into manageable Jobs are then allocated to Each individual should
similar in nature are
activities so that duplication the members of each also know who he has to
grouped together and
can be avoided and the department in accordance take orders from and to
this grouping process is
burden of work can be to their skills and whom he is accountable.
called
shared among the competencies.
departmentalisation.
employees.
IDENTIFY THE STEP OF ORGANISING PROCESS

• This step refers to combine/club or group similar or related jobs into

larger units called departments.
Departmentalisation
• In this step the work is allocated to the employees according to their
experience, skills or competencies.
Assignment of duties
• This step is concerned with from whom an employee has to receive
orders or instructions and to whom he is accountable.
Establishing reporting relationships
• In this step the entire work is divided into manageable activities.
Identification and division of work
 IMPORTANCE OF ORGANISING
• (i) Benefits of specialisation: Organising leads to a systematic allocation
of jobs amongst the work force. This reduces the workload as well as
enhances productivity because of the specific workers performing a
specific job on a regular basis. Repetitive performance of a particular task
allows a worker to gain experience in that area and leads to
specialisation.
• (ii) Clarity in working relationships: The establishment of working
relationships clarifies lines of communication and specifies who is to
report to whom. This removes ambiguity in transfer of information and
instructions. It helps in creating a hierarchical order thereby enabling the
fixation of responsibility and specification of the extent of authority to be
exercised by an individual.
• Optimum utilization of resources: Organising leads to the proper
usage of all material, financial and human resources. The proper
assignment of jobs avoids overlapping of work and also makes
possible the best use of resources. Avoidance of duplication of
work helps in preventing confusion and minimising the wastage of
resources and efforts.
• (iv) Adaptation to change: The process of organising allows a
business enterprise to accommodate changes in the business
environment. It allows the organisation structure to be suitably
modified and the revision of inter-relationships amongst
managerial levels to pave the way for a smooth transition. It also
provides much needed stability to the enterprise as it can then
continue to survive and grow inspite of changes.
• (v) Effective administration: Organising provides a clear description of jobs and
related duties. This helps to avoid confusion and duplication. Clarity in working
relationships enables proper execution of work. Management of an enterprise
thereby becomes easy and this brings effectiveness in administration.
• (vi) Development of personnel: Organising stimulates creativity amongst the
managers. Effective delegation allows the managers to reduce their workload
by assigning routine jobs to their subordinates. The reduction in workload by
delegation is not just necessary because of limited capacity of an individual but
also allows the manager to develop new methods and ways of performing
tasks. It gives them the time to explore areas for growth and the opportunity to
innovate thereby strengthening the company’s competitive position.
Delegation also develops in the subordinate the ability to deal effectively with
challenges and helps them to realise their full potential.
• (vii) Expansion and growth: Organising helps in the growth and diversification
of an enterprise by enabling it to deviate from existing norms and taking up
new challenges.
IDENTIFY THE IMPORTANCE OF ORGANISING

• Organising helps the company to incorporate changes of the business environment in the company by suitably
modifying the organisation structure.
ADAPTATION TO CHANGE
• Organsing helps the managers to divide the total work into parts and allocate work to employees according to
their ability, knowledge and skill.
BENEFITS OF SPECIALISATION
• This removes ambiguity in transfer of information and instructions.
CLARITY IN WORKING RELATIONSHIPS
• Organising leads to the proper usage of all resources.
OPTIMUM UTILISATION OF RESOURCES
• Organising helps in avoiding confusion and duplication and enables proper execution of work.
EFFECTIVE ADMINISTRATION
• Organising stimulates creativity amongst the managers.
DEVELOPMENT OF PERSONNEL
• Organising enables a business enterprise to add more job positions, departments and even diversify their
product lines.
EXPANSION AND GROWTH
ORGANISATION STRUCTURE
• The organisation structure can be defined as the framework within which
managerial and operating tasks are performed. It specifies the relationships
between people, work and resources.
It allows correlation and coordination among human, physical and financial
resources and this enables a business enterprise to accomplish desired goals.
The organisation structure of a firm is shown in an organisation chart.
• Types: Functional and Divisional Structure
• Span of Management (span of supervision): Span of management refers to the
number of subordinates that can be effectively managed by a superior. This
determines the levels of management in the structure.
• Benefits of Organisational Structure:
It will result in increased profitability of the enterprise.
It allows correlation and coordination among human, physical and financial resources
and this enables business enterprise to accomplish the desired goals.
A proper structure is essential to ensure a smooth flow of communication and better
control over the operations of a business enterprise.
FUNCTIONAL STRUCTURE
• Grouping of jobs of similar nature under functional and organising
these major functions as separate departments creates a functional
structure. All departments report to a coordinating head.
For example, in a manufacturing concern division of work into key
functions will include production, purchase, marketing, accounts and
personnel. These departments may be further divided into sections.
Thus, a functional structure is an organisational design that groups
similar or related jobs together.
• SUITABILITY:
When the size of organisation is large and producing single product or small
number of related products
When the organisation has to carry out diversified activities
When the operations of the organisation need high degree of specialisation
ORGANISATION CHART OF FUNCTIONAL STRUCTURE
 MERITS
• (a) FUNCTIONAL SPECIALISATION - A functional structure leads to occupational
specialisation since emphasis is placed on specific functions. This promotes
efficiency in utilisation of manpower as employees perform similar tasks within a
department and are able to improve performance.
• (b) BETTER CONTROL AND COORDINATION - It promotes control and coordination
within a department because of similarity in the tasks being performed.
• (c) EFFICIENCY - It helps in increasing managerial and operational efficiency and this
results in increased profit.
• (d) MINIMISES COSTS - It leads to minimal duplication of effort which results in
economies of scale and this lowers cost.
• (e) FACILITATES TRAINING - It makes training of employees easier as the focus is only
on a limited range of skills.
• (f) PROPER ATTENTION - It ensures that different functions get due attention.
 DEMERITS
• (a) DE-EMPHASIS ON ORGANISATIONAL OBJECTIVES - A functional structure places less emphasis
on overall enterprise objectives than the objectives pursued by a functional head. Such practices
may lead to functional empires wherein the importance of a particular function may be
overemphasised. Pursuing departmental interests at the cost of organisational interests can also
hinder the interaction between two or more departments.
• (b) PROBLEMS IN COORDINATION - It may lead to problems in coordination as information has to
be exchanged across functionally differentiated departments.
• (c) INTER-DEPARTMENTAL CONFLICTS - A conflict of interests may arise when the interests of two
or more departments are not compatible. For example, the sales department insisting on a
customer friendly design may cause difficulties in production. Such dissension can prove to be
harmful in terms of fulfillment of organisational interest. Inter-departmental conflicts can also arise
in the absence of clear separation of responsibility.
• (d) INFLEXIBILITY - It may lead to inflexibility as people with same skills and knowledge base may
develop a narrow perspective and thus, have difficulty in appreciating any other point of view.
Functional heads do not get training for top management positions because they are unable to
gather experience in diverse areas.
• (e) DIFFICULTY IN FIXING ACCOUNTABILITY – It becomes difficult to hold a particular department
responsible for any problems. For eg – when sales are declining, then who is responsible, the
production department for not producing quality products or marketing department, it becomes
difficult to determine.
 DIVISIONAL STRUCTURE
• It is structure comprising of separate business units or divisions, created on
the basis of products manufactured. For eg: if a company is producing
cosmetics, medicine, soap, textile, cement, footwear, garments etc then all
the activities related to a soap will be grouped in soap department, all the
activities of the footwear under the footwear department and so on.
• The divisional head of each division is responsible for the profit and loss of
his/her division so that each division works as a profit center and has
authority over it.
• SUITABILITY:
When organisations producing multiple products with distinctive features
When an organisation grows and needs to add more employees, create
more departments and introduce new levels of management.
When organisations require product specialisation
ORGANISATION CHART OF DIVISIONAL STRUCTURE
 MERITS
• (a) PRODUCT SPECIALISATION - Product specialisation helps in the development
of varied skills in a divisional head and this prepares him for higher positions.
This is because he gains experience in all functions related to a particular
product.
• (b) GREATER ACCOUNTABILITY - Divisional heads are accountable for profits, as
revenues and costs related to different departments can be easily identified and
assigned to them. This provides a proper basis for performance measurement. It
also helps in fixation of responsibility in cases of poor performance of the
division and appropriate remedial action can be taken.
• (c) FLEXIBILITY AND INITIATIVE - It promotes flexibility and initiative because
each division functions as an autonomous unit which leads to faster decision
making.
• (d) EXPANSION AND GROWTH - It facilitates expansion and growth as new
divisions can be added without interrupting the existing operations by merely
adding another divisional head and staff for the new product line.
 DEMERITS
• (a) CONFLICTS - Conflict may arise among different divisions with reference
to allocation of funds and further a particular division may seek to maximise
its profits at the cost of other divisions.
• (b)EXPENSIVE - It may lead to increase in costs since there may be a
duplication of activities across products. Providing each division with
separate set of similar functions increases expenditure.
• (c)ORGANISATIONAL INTEREST IGNORED - It provides managers with the
authority to supervise all activities related to a particular division. In course
of time, such a manager may gain power and in a bid to assert his
independence may ignore organisational interests.
DIFFERENCE BETWEEN FUNCTIONAL AND DIVISIONAL STRUCTURE

BASIS FUNCTIONAL STRUCTURE DIVISIONAL STRUCTURE

Formation Formation is based on functions Formation is based on product lines and is
supported by functions.

Specialisation Functional specialisation Product specialisation.

Responsibility Difficult to fix on a department. Easy to fix responsiblity for performance.

Managerial Difficult, as each functional manager has to Easier, autonomy as well as the chance to
Development report to the top management. perform multiple functions helps in
managerial development.
Cost Functions are not duplicated hence Duplication of resources in various
economical departments, hence costly

Coordination Difficult for a multiproduct company. Easy, because all functions related to a
particular product are integrated in one
department.
CASE STUDY
• Voltage Fluctuations have been common and quite high in India. They harm our
electrical appliances like televisions, refrigerators and air conditioners, often
leaving them in a permanently damaged condition. N-Guard Company decided
to manufacture stabilizers for North India was taken care of, they decided to
launch stabilizers of varying voltages from 90V-260V for meeting the
requirements of voltage fluctuations in other regions of India also. The engineers
were appointed for South, West and East regions of India, as the voltage was
different in all the three regions. Though all the engineers were appointed to
manufacture stabilizers but the product differed from region to region.
a) Identify the organisation structure of N-Guard Company.
b) State any three advantages and three limitations of the structure identified
above.
ANS –
a) N-Guard Company has adopted a Functional Structure.
b) (explain) Merits and Demerits
IDENTIFY THE ORGANISATIONAL STRUCTURE
• All similar activities are grouped in one department.
FUNCTIONAL
• All jobs related to marketing are grouped in marketing department.
FUNCTIONAL
• It is difficult to hold a particular department accountable for non-accomplishment of organisational objectives.
FUNCTIONAL
• It makes training of employees easier as the focus is only on a limited range of skills.
FUNCTIONAL
• It leads to minimum duplication of effort which results in lower costs.
FUNCTIONAL
• It brings product specialisation.
DIVISIONAL
• A separate department is created for each major product.
DIVISIONAL
• Inter-departmental conflicts is one of the disadvantages of this structure.
FUNCTIONAL
• Identify the type of organisational structure:
Alka Ltd is a city based flourishing company. Recently it has won award for being the
most economical company as the functions are not duplicated in it.
Functional Structure
Vivek runs a company in Chennai. The company is known for its product
specialisation and has a lot of reputation in the market.
Divisional Structure
Daksh is an owner of a reputed manufacturing company. However, in his company it
is difficult to fix responsibility on a particular department.
Functional Structure
Sunaina is a dynamic CEO. In her company she allows for her autonomy and
opportunity to perform multiple functions. This has led to managerial development in
her employees.
Divisional Structure
Synchronization of efforts is easy in ABC Ltd. as all the functions related to a
particular product are integrated within one department.
Divisional Structure
 FORMAL ORGANISATION
• Formal organisation refers to the organisation structure which is designed by the
management to accomplish a particular task. It specifies clearly the boundaries of
authority and responsibility and there is a systematic coordination among the
various activities to achieve organisational goals.
• The structure in a formal organisation can be functional or divisional.
CHARACTERISTICS
• (a) It specifies the relationships among various job positions and the nature of their
interrelationship. This clarifies who has to report to whom.
• (b) It is a means to achieve the objectives specified in the plans, as it lays down
rules and procedures essential for their achievement.
• (c) Efforts of various departments are coordinated, interlinked and integrated
through the formal organisation.
• (d) It is deliberately designed by the top management to facilitate the smooth
functioning of the organisation. al organisation can be functional or divisional.
• (e) It places more emphasis on work to be performed than interpersonal
relationships among the employees.
 ADVANTAGES
• (a) FIXATION OF RESPONSIBILITY - It is easier to fix responsibility since mutual
relationships are clearly defined.
• (b) CLARITY OF DUTIES - There is no ambiguity in the role that each member has
to play as duties are specified. This also helps in avoiding duplication of effort.
• (c) UNITY OF COMMAND - Unity of command is maintained through an
established chain of command.
• (d)ACCOMPLISHMENT OF ORGANISATIONAL OBJECTIVES - It leads to effective
accomplishment of goals by providing a framework for the operations to be
performed and ensuring that each employee knows the role he has to play.
• (e) STABILITY - It provides stability to the organisation. This is because behaviour
of employees can be fairly predicted since there are specific rules to guide them.
 DISADVANTAGES
• (a) PROCEDURAL DELAYS - The formal communication may lead to
procedural delays as the established chain of command has to be followed
which increases the time taken for decision making.
• (b) LACK OF INITIAVE - Poor organisation practices may not provide adequate
recognition to creative talent, since it does not allow any deviations from
rigidly laid down polices.
• (c) DIFFICULTY TO FULLY UNDERSTAND HUMAN RELATIONSHIPS - It is
difficult to understand all human relationships in an enterprise as it places
more emphasis on structure and work. Hence, the formal organisation does
not provide a complete picture of how an organisation works.
 INFORMAL ORGANISATION
• Interaction among people at work gives rise to a ‘network of social relationships among
employees’ called the informal organisation.
Informal organisation emerges from within the formal organisation when people interact
beyond their officially defined roles. When people have frequent contacts they cannot be
forced into a rigid formal structure. Rather, based on their interaction and friendship they
tend to form groups which show conformity in terms of interest.
Informal organisation has no written rules, is fluid in form and scope and does not have fixed
lines of communication
CHARACTERISTICS
• (a) An informal organisation originates from within the formal organisation as a result of
personal interaction among employees.
• (b) The standards of behaviour evolve from group norms rather than officially laid down
rules and regulations.
• (c) Independent channels of communication without specified direction of flow of
information are developed by group members.
• (d) It emerges spontaneously and is not deliberately created by the management.
• (e) It has no definite strucure or form because it is a complex network of social
relationships among members.
 ADVANTAGES
• (a) FASTER SPREAD OF INFORMATION - Prescribed lines of communication
are not followed. Thus, the informal organisation leads to faster spread of
information as well as quick feedback.
• (b)FULFILS SOCIAL NEEDS - It helps to fulfill the social needs of the
members and allows them to find like minded people. This enhances their
job satisfaction since it gives them a sense of belongingness in the
organisation.
• (c) FILLS INADEQUACIES OF FORMAL STRUCTURE - It contributes towards
fulfillment of organisational objectives by compensating for inadequacies in
the formal organisation. For example, employees reactions towards plans
and policies can be tested through the informal network.
 DISADVANTAGES
• (a) SPREAD RUMOURS - Informal organisation may become a disruptive force when it
spreads rumours. This may work against the interest of the formal organisation.
• (b)RESISTANCE TO CHANGE - The management may not be successful in implementing
changes if the informal organisation opposes them. Such resistance to change may delay
or restrict growth.
• (c) PRIORITY TO GROUP INTERESTS - It pressurises members to conform to group
expectations. This can be harmful to the organisation if the norms set by the group are
against organisational interests.

Conclusion
Informal organisation cannot be altogether eliminated. Thus, it would be in the best
interest of the organisation if the existence of such groups is recognised and the roles
that their members play are identified. The knowledge of such groups can be used to
gather their support and consequently lead to improved organisational performance.
Such groups can also provide useful communication channels. Instead of confronting
them, the management should skillfully take advantage of both the formal and informal
organisation so that work continues smoothly
 DIFFERENCE BETWEEN FORMAL AND INFORMAL ORGANISAITON
BASIS FORMAL ORGANISATION INFORMAL ORGANISATION
Meaning Structure of authority relationships created Network of social relationships arising
by the management out of interaction among employees
Formation/ It is deliberately created as a result of Informal organisation originates as a
Origin company rules and policies. result of social interaction among
employees
Authority Authority arises on the basis of position in Authority arises out of personal qualities
management

Behavior of Members Standards of behaviour and performance are Standards of behaviour are evolved by
prescribed and enforced by the management. mutual consent among members.

Flow of Communication Communication flows through scalar chain There is no fixed patterns of
and managers prefer written channels for communication. Information can travel
communication from any direction.
Nature It is rigid. It is flexible.
Leadership Managers are leaders Leaders may or may not be managers.
They are chosen by the group members
IDENTIFY THE TYPE OF ORGANISATION
• It originates to satisfy social needs.
INFORMAL
• Official relationship exists among members.
FORMAL
• Employees have formed a volleyball club.
INFORMAL
• The principle of scalar chain is followed.’
FORMAL
• It is based on personal likes and dislikes.
INFORMAL
• It leads to faster spread of information as well as quick feedback.
INFORMAL
• Employees of a company enjoying a picnic in a park.
INFORMAL
• Thirty workers and three managers of Hindustan Unilever Limited forming a ‘Dramatics Club’.
INFORMAL
 DELEGATION
• It refers to the transfer of authority from a superior
to a subordinate.
• Delegation is the entrustment of responsibility and
authority to another and the reaction of
accountability for performance.
• The person who delegates the authority is called
delegator and the person who receives the
authority is known as delegatee.
• The purpose is to reduce or lessen the burden of
the managers, so that they can devote greater time
and attention on important matters.
• Delegation helps a manager to extend his area of
operations as without it, his activities would be
restricted to only what he himself can do. However,
delegation does not mean abdication. The manager
shall be accountable for the performance of the
assigned tasks. The authority granted to a
subordinate can be taken back and redelegated to
another person.
 ELEMENTS OF DELEGATION
• AUTHORITY – (power)
1. Authority refers to the right of an individual to command his subordinates and to take action
within the scope of his position.
2. The concept of authority arises from the established scalar chain which links the various job
positions and levels of an organisation.
3. It always moves downward from a superior to a subordinate.
4. For effective delegation, authority must be delegated with equal responsibility. (refer to the
principal concept here)
5. Eg – the sales manager should grant the sales executives the authority to give free samples of
the books to the subject teachers and also to decide the rate of discount and credit period within
the selling policy of the company.
• RESPONSIBILITY - (duty)
1. It means the obligation of a subordinate to properly perform the assigned duty. Responsibility
arises from superior-subordinate relationship because the subordinate is bound to perform the
duty assigned to him by his superior.
2. It always flows upwards from a subordinate to a superior.
3. Eg – a sales manager has to sell 25,000 ‘Business Studies’ each for class XI and XII during one year.
He has five sales executives under him. He can assign the task of selling 5,000 books each for
Class XI and XII to each sales executive.
• ACCOUNTABILITY – (answerability)
1. It means answerability for the final outcome of the assigned task.
2. It can be delegated by a superior to his subordinates but accountability
cannot be passed or delegate because it is absolute in nature.
3. It always flows upwards from a subordinate to a superior.
4. Even when a manager delegates his part of responsibility and authority to
his subordinates, he remains accountable to his superior for his own work
as well as the work of his subordinates.
5. Eg – the sales manager remains accountable in case of non-accomplishment
of desired target as accountability cannot be shifted or delegated because it
is absolute.
BASIS AUTHORITY RESPONSIBILITY ACCOUNTABILITY

Meaning Authority means right to take Responsibility means obligation Accountability means
decision to perform the given work answerability for the final
results of the assigned work

Delegation Authority can be delegated Responsibility cannot be Accountability cannot be

delegated completely delegated at all because it is
absolute

Flow Authority always flow Responsibility always flows Accountability always flows
downwards from a superior upwards from a subordinate to a upwards from a
to a subordinate superior subordinate to superior

Origin It arises from the formal Responsibility arises from Accountability originates
position in an organisation delegation of authority from responsibility or task
assigned.
 IMPORTANCE OF DELEGATION
• (i) Effective management: By empowering the employees, the managers are
able to function more efficiently as they get more time to concentrate on
important matters. Freedom from doing routine work provides them with
opportunities to excel in new areas. Thus one can make better use of his
valuable time and ability.
• (ii) Employee development: As a result of delegation, employees get more
opportunities to utilise their talent and this may give rise to latent abilities in
them. It allows them to develop those skills which will enable them to
perform complex tasks and assume those responsibilities which will improve
their career prospects. It makes them better leaders and decision makers.
Thus, delegation helps by preparing better future managers.
• (iii) Motivation of employees: Delegation helps in developing the talents of
the employees. It also has psychological benefits. When a superior entrusts
a subordinate with a task, it is not merely the sharing of work but involves
trust on the superior’s part and commitment on the part of the
subordinate. Responsibility for work builds the self-esteem of an employee
and improves his confidence. He feels encouraged and tries to improve his
performance further.
• (iv) Facilitation of growth: Delegation helps in the expansion of an
organisation by providing a ready workforce to take up leading positions in
new ventures. Trained and experienced employees are able to play
significant roles in the launch of new projects by replicating the work ethos
they have absorbed from existing units, in the newly set up branches.
• (v) Basis of management hierarchy: Delegation of authority establishes
superior-subordinate relationships, which are the basis of hierarchy of
management. It is the degree and flow of authority which determines
who has to report to whom. The extent of delegated authority also
decides the power that each job position enjoys in the organisation.
• (vi) Better coordination: The elements of delegation, namely authority,
responsibility and accountability help to define the powers, duties and
answerability related to the various positions in an organisation. This
helps to avoid overlapping of duties and duplication of effort as it gives a
clear picture of the work being done at various levels. Such clarity in
reporting relationships help in developing and maintaining effective
coordination amongst the departments, levels and functions of
management.
Thus, delegation is a key element in effective organising.
 DECENTRALISATION
• Decentralisation means systematic delegation
of authority through all the levels of
management and in all department except that
which can be exercised only at central points.
• Decentralisation is an optional policy and it
depends on the direction of the top
management.
• It has wide scope as it involves extension of
delegation to the lowest level of management.
When we decentralise authority, we multiply it
by many.
• Its purpose is to increase the role and autonomy
of lower level managers.
 RELATION BETWEEN DELEGATION AND DECENTRALISATION

Decentralisation is an extension of delegation to the lowest levels of

management in the organisation. It amounts to pushing down authority to all
managerial levels.
Delegation means entrustment of responsibility and authority by a superior to
the subordinate. Decentralisation means distribution of authority throughout
the organisation.
In delegation authority is multiplied by two as authority is shared between
superior and subordinate. But in decentralisation authority is multiplied by as
many as authority is shared between different superiors and subordinates in
all departments and at all levels of management.
If we delegate the authority, we multiply it by two; if we decentralise it, we
multiply it by many.
 IMPORTANCE OF DECENTRALISATION
Decentralisation is a philosophy that implies selective dispersal of authority because it
propagates the belief that people are competent, capable and resourceful and can
assume responsibility for effective implementation of their decisions.

• (i) Develops initiative among subordinates: Decentralisation helps to promote self-

reliance and confidence amongst the subordinates. This is because when lower
managerial levels are given freedom to take their own decisions they learn to depend on
their own judgment.
• (ii) Develops managerial talent for the future: Formal training plays an important part in
equipping subordinates with skills that help them rise in the organisation but equally
important is the experience gained by handling assignments independently.
Decentralisation gives them a chance to prove their abilities and creates a reservoir of
qualified manpower who can be considered to fill up more challenging positions through
promotions.
• (iii) Quick decision making: The management hierarchy can be looked upon as a chain of
communication. In centralised organisation because every decision is taken by the top
management the flow of information is slow as it has to traverse many levels. Response
also takes time. This reduces the speed of decision making and makes it difficult for an
enterprise to adapt to dynamic operating conditions.
• (iv) Relief to top management: Decentralisation diminishes the amount of direct
supervision exercised by a superior over the activities of a subordinate because
they are given the freedom to act and decide albeit within the limits set by the
superior. Also, personal supervision is generally replaced by other forms of control
such as return on investment etc. Decentralisation also leaves the top
management with more time which they can devote to important policy decisions
rather than occupying their time with both policy as well as operational decisions.
• (v) Facilitates growth: Decentralisation awards greater autonomy to the lower
levels of management as well as divisional or departmental heads. This allows
them to function in a manner best suited to their department and fosters a sense
of competition amongst the departments.
• (vi) Better control: Decentralisation makes it possible to evaluate performance at
each level and the departments can be individually held accountable for their
results. The extent of achievement of organisational objectives as well as the
contribution of each department in meeting the overall objectives can be
ascertained. Feedback from all levels helps to analyse variances and improve
operations. In decentralisation, one of the challenges is the accountability of
performance. In response to this challenge, better control systems are being
evolved such as the balance score card and management information system.
Decentralisation compels the management to innovative performance
measurement systems.
 BASIS DELEGATION DECENTRALISATION
Nature/ Delegation is mandatory act because no individual can Decentralisation is an optional policy and
Essentiality perform all tasks on his own it depends on the direction of the top
management.
Freedom of Action The superior exercises more control over the There is greater freedom of action due to
performance of his subordinates to whom authority is less control by the top management.
delegated. Hence, less freedom to take actions.

Status Delegation is a process followed to share tasks and Decentralisation is the outcome of the
authority Policy decision taken by the top
management.
Scope/Parties The scope of delegation is narrow as it is confined to a It has wide scope as it involves extension
involved superior and his immediate subordinate. When we of delegation to the lowest level of
delegate authority, we multiply it by two. management. When we decentralise
authority, we multiply it by many.

Purpose/ Significance The purpose is to reduce or lessen the burden of the Its purpose is to increase the role and
managers, so that they can devote greater time and autonomy of lower level managers.
attention on important matters.
• Name the process of grouping the activities of similar nature.
Departmentalisation

• Name the two forms of organisational structure.

Functional and Divisional Structure

• Name the kinds of organisation.

Formal and Informal Organisation

• “Identifying and dividing the work” is the first step in the process of one of the functions of
management. Identify the function.
Organising

• Which organisational structure is suitable for high degree of specialisation?

Functional Structure

• Name the type of organisation in which job description and rules and procedures related to work
processes are laid down.
Formal Organisation
• Which function of management coordinates human efforts, assembles resources and integrates both in
a unified whole to be utilised for achieving specified objectives?
Organising
• What is the nature of formal organisation?
Rigid
• Atul Ltd is manufacturing cosmetics, medicines and shoes. Which type of organisation structure would
suit the requirements of such organisation?
Divisional Structure
• Name the term which states that ‘the number of subordinates that can be effectively managed by a
superior’.
Span of Management
• How can departments or divisions created?
Departments are created on the basis of:
 Functions (production, marketing, finance etc)
 Territory (east, west, north, south)
 Products (garments, cosmetics, medicine)

• Why is it easy to fix responsibility in formal organisation?

It is easy to fix responsibility in formal organisation as mutual relationships are clearly defined.
• Name the type of organisation which is fluid in form and scope and does not have fixed lines
of commuication.
Informal Organisation
• What is essential along with responsibility to make delegation effective?
Authority
• Name the process of sharing work between a manager and his subordinates.
Delegation of Authority
• Which kind of structure, it is easy to fix responsibility?
Divisional Structure
• Name the concept, which involves systematic delegation of authority throughout all the
levels of the organisation.
Decentralisation
• In which direction does responsibility flow?
Responsibility flows upwards from a subordinate to a superior.
• Decentralisation is the extension of a concept. Name the concept.
Delegation of Authority
• What are the elements of delegation of authority?
Authority, Responsibility and Accountability
• Which function of management is a means for translating plans into action and
includes the designing of roles to be filled by suitably skilled people?
Organising
• What is meant by Informal Organisation?
Interaction among people at work gives rise to a ‘network of social relationships
among them’ called the informal organisation.
• It arises from superior-subordinate relationship wherein the subordinate is bound
to perform the duty assigned to him by the superior. Identify it.
Responsibility
• What is meant by Formal Organisation?
Formal Organisation is defined as the organisation structure which is designed and
established by the management to achieve organisational goals.
• Name the type of organisation which does not have predetermined objectives.
Informal Organisation
• Define Organisational Structure.
The framework within which managerial and operating tasks are performed is
called Organisational Structure. It specifies the relationships between people,
work and resources.
• Gurpreet Ltd. has been awarded recently with the ‘Best Employer of the Year
Award’. The company has believed in the ideas and suggestions of its
employees. There is systematic dispersal of decision making at all levels.
There is no delay in delivery of orders to customers due to prompt decisions
taken by the employees.
• Identify and state the concept of management followed by the company.
ANS: a) Decentralisation: it refers to systematic delegation of authority through
all the levels of management and in all the departments except that which
can be exercised only at central point.
• In connection with New Year Celebration employees of Vodafone have
formed a small group who organised a feast and conducted entertainments.
Which type of organisation is this?
Informal Organisation

• In Doon Public School, the principal Mr. Sharma was on a leave for ten days
to attend a seminar in Dubai. He authorised the vice-principal Ms Kanika to
take incharge and assume the responsibilities.
a) Identify the concept of management followed by the school.
b) Explain the components of the concept identified above.
ANS:
a) Delegation
b) Components are: Authority, Responsibility and Accountability
• XYZ Ltd has grown in size. It was a market leader but with the changes in
the business environment and with the entry of MNCs its market share is
declining. To cope up with the situation the CEO starts delegating some
of its authority to General Manager, who also felt himself overburdened
and with the approval of the CEO disperses some of its authority to
various levels throughout the organisation. Identify the concept of
management discussed above.
ANS: Decentralisation

• Grouping of jobs of similar nature and organising these jobs as separate

departments creates a particular type of organisational structure. Name
the type of organisational structure.
ANS: Functional Structure
• Sharda Ltd is pursuing diversified activities which require high degree of
specialisation. Identify the type of structure that should be followed by
Sharda Ltd.
Ans: Functional Structure

• Raghu works as a human resource manager in ‘AP Housing Ltd’ ,a

company to start a sports club in the office where friendly indoor
matches can be organised amongst the employees every Saturday.
Identify the type of organisation that Raghu is desirous of promoting in the
company.
ANS: Informal Organisation
• Nidhi works as a Marketing Manager in a small company. The company
has recently launched a new brand of room fresheners through
aggressive promotion. However, the product is less in demand and its
sales are low. She decides to study the reasons for the poor liability of
the product through a market research. Keeping in view the volume of
work, she knows it will be impractical for her to handle it all by herself. In
order to share her work, she deploys a team of executives. She gives
them the necessary authority and assigns them the responsibility to
conduct the research and report back to her so that she can make the
decisions.
Identify and explain the concept used by Nidhi.

ANS: Delegation of authority

• Save Ltd. a pesticide manufacturing company. The company identifies the
various types of activities to be done. For this, it divides the work into various
departments. The company gets involved in its business with complete
dedication. After one year of successful run the company decides to transfer
the decision making. For this a major policy decision is taken.
Identify the function of management
Identify the concept of management.
Explain the next two steps of the function identified.
ANS:
a. Organising
b. Decentralisation
c. Assignment of duties
Establishing reporting relationships
• Mathur Industries is a company dealing in office furniture. The company
chose to diversify its operations to improve its growth potential and
increase market share. As the project was important, many alternatives
were generated for the purpose and were thoroughly discussed among
the members of the organisation. After evaluating the various
alternatives, Sarthak, the Managing Director of the company, decided
that they should add ‘Home Interiors and Furnishings’ as a new line of
business activity.
Name the framework, which the diversified organisation should adopt, to
enable it to cope with the emerging complexity? Give reason in support
of your answer.
ANS:
Divisional Structure should be adopted by the diversified organisation to
enable it to cope with the emerging complexity.
Reason: It leads to faster decision making, promotes flexibility and
initiative because each division functions as an autonomous unit.
• “Spices Ltd” are the manufacturer of different food specific spices. Mr. Raghu, the owner
of the company has created different departments for purchase, production, marketing,
finance and human resource. There are thirty employees working in the organisation.
Planning is of paramount importance to the company as Mr. Raghav believes that
effective planning leads to achievement of organisational goals. So in order to make
employees focus on objectives, he issued instructions that during working hours only
official matters will be discussed. He made certain rules and code of conduct for the
employees to follow, according to which employees are not allowed to visit and talk to the
employees of other departments except for official work. He emphasized on work
performance which resulted in smooth functioning of the organisation.
1. Identify and state the type of organisation mentioned in the above para.
2. State features of the concept identified in the above part.
3. What was the purpose behind formulation of rules for the employees that restricted
their personal communication with the employees of other departments?
ANS:
1. Formal Organisation
2. Features (explain)
3. The purpose is to ensure discipline at workplace and avoid wastage of time. This is to
help to curb the emergence of informal organisation.
• Ecstatic Ltd is a well known company dealing in office furniture. Over the years the
business of the company has grown manifolds. It now plans to expand its business
and venture into home furniture segment. At present the company is following
functional structure. Does the company need to modify its organisational
structure keeping in view its expansion plan? Why or why not?
ANS: No, the company need not modify its organisational structure keeping in view
its expansion plan because even after expansion the requirements of business in
terms of raw materials, machines and equipment required remains same.

• Sprightly Ltd. is a reputed company offering varied kinds of energy drinks. The
company now plans to launch a new range of sports wear. At present the company
is following functional structure. Does the company need to modify its keeping in
view expansion plan? Why or why not?
ANS: Yes, the company needs to modify its organisational structure keeping in view
its expansion plan because a new division of business is being introduced which
requires a different type of raw material, machines, equipments etc.
• Progress Ltd. is facing difficulties in introduction of machinery of latest technology as
they are facing resistance from informal groups who are pressurizing the members
to work against organisational interests. As the Human Resource Manager of the
company would you advise the management of the company to confront them or
give them some other suggestion to deal with the informal groups.
ANS:
As the Human Resource Manager of the company I would advise the management of
the company along with the following points:
It is advisable for the management to give due recognition to such informal groups
within the organisation as the informal organisation offer many benefits. In this way
the organisation can enhance its efficiency and effectiveness.
The informal organisation leads to faster spread of information as well as quick
feedback as the prescribed lines of communication are not followed. Thus, it can be
used effectively to assimilate or dissimilate information during emergency also.
Another advantage of informal organisation is that it helps to fulfill the social needs
of the members by giving them a sense of belongingness in the organisation and
enhances their job satisfaction.
• Ram, aged 49 is working in an aviation company. He is the senior most employee in
the division. He is even senior to the division manager, Kanaputti. Ramdas is
considered one of the most committed, capable and hard working employees. As a
result of his abilities and seniority, he generally received the work assignments of
his choice. Although there was no formal designation of various special projects
assigned to Ramdas, he handled them as a matter of routine. A problem developed
when an able and intelligent person Naman, aged 33, was appointed by Kanaputti.
Naman’s previous three years experience in the closely related work, made it
possible for him to catch on to the routine work of his new job more rapidly than
was customary for a new employee. On several occassions, Kanaputti noticed the
tension developing between the two employees. However, he didn’t want to get
involved in their personal issues as long as the work was completed effectively and
efficiently by them. One day, the tension between them reached the boiling point
and Ram complained to Kanaputti stating that his duties were being largely taken
over by Naman. Kanaputti issued the order stating the clear allocation of the jobs
and related duties between the two. He furthur clarified the working relationship
between them by specifying who was to report to whom. This helped in reducing
the workload, enhancing productivity and removing ambiguity.
a. Identify and state the step of organising process which have been undertaken by
Kanaputti to respond to the complaint of Ram.
b. Identify and state the step of organising process which have not been carried out
properly and contributed to this problem.
• ANS:
a. The two steps of organising process undertaken by Kanaputti to
respond to the complaints of Ram are:
 Assigning of duties
 Establishing reporting relationships
b. The step of process which has not been carried out properly and
contributed to this problem is Assignment of duties. Assignment of
duties: once departments have been created each one of them is
placed under the charge of an individual and then jobs are allocated to
all members as per their job positions.